FATCA requirements are causing some Hong Kong banks to elect to close U.S. accounts rather than put forth the time and money to comply with the strict reporting requirements.
Taxpayers from the United States who are living or working in other countries have continued to face negative consequences of the Foreign Accounts Tax Compliance Act (FATCA). The law was passed in 2010 and went into effect in July of 2014. It basically requires foreign financial institutions around the world to comply with strict information reporting requirements regarding all account holders who are U.S. taxpayers. Banks, investment groups, and even insurance companies are now required to report on qualifying US accounts and face strict penalties for failing to comply. So far, nearly five hundred jurisdictions throughout the world have signed agreements with the IRS, but some areas and institutions continue to hold out.
The Better of Two Evils
Rather than dealing with the significant financial and operational burden of organizing the necessary processes, training, and personnel for handling the U.S. reporting requirements, many institutions are choosing to simply drop account holders from the United States. Some refuse to open accounts or enter into business with American citizens, and others have chosen to close such accounts.
For example, Hong Kong signed an inter-governmental agreement with the IRS last year, and since then, many banks based in Hong Kong have refused to open new accounts for American citizens and companies. In effect, the individual financial institutions have weighed the requirements and found it more favorable to deny the extra business rather than navigate the strict FATCA requirements. It is estimated that there are nearly 50,000 U.S. citizens living in Hong Kong and as a result of these recent decisions, many are seeking to relinquish their U.S. citizenship so they can continue to work and operate their businesses in Hong Kong without dealing with the ongoing headache of FATCA financial policy and politics or fear of being shut out of their Hong Kong-based accounts.
If you live, work, invest, or operate a business outside of the United States, it is important to contact your foreign financial institution to ask what their plan for FATCA compliance is and how you may be affected. You do not want to be caught off guard, and may need to consult your tax attorney to determine the best financial path for the future.
About Freeman Tax Law
Freeman Tax Law (FTL) is a boutique law firm consisting of a multi-disciplinary team of tax professionals including tax attorneys, CPAs and a professional staff that have vast experience with foreign tax compliance and regulatory matters for financial institutions. FTL consults with both FFIs and USFIs with regard to Foreign Account Tax Compliance Act (FATCA) and related regulatory matters and assists them developing procedures on how to comply with these laws. FTL provides a multidisciplinary approach for filing offshore voluntary disclosures. Working to help clients prevent future tax headaches we offer a complete wealth management and estate planning team. As an experienced firm with wide reach, Freeman Tax Law provides immediate assistance to our clients planning for and resolving all tax related challenges.
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